Kothari Sugar and Chemicals Ltd. Vs. Cce - Court Judgment

Excerpt:
1. the appeal filed by m/s. kothari sugars & chemicals limited is directed against a demand of duty of rs. l,27,534/- and a penalty of equal amount. the demand of duty is consequential to inclusion in assessable value, of excess freight and insurance charges collected by the assessee from their buyers during 1996-2001. the assessee was collecting freight and insurance charges from their buyers for making delivery of the goods at the latter's premises. the department took the view that the ownership of the goods remained with the assessee until the goods reached the buyer's premises and therefore the freight and insurance charges collected from the buyers were liable to be included in the assessable value of the goods. the assessee replied that the goods were sold to their customers directly at the factory gate (as indicated in their declaration under rule 173c) and that the sale of the goods could not be considered to have taken place at the point of delivery by mere reason of freight and insurance having been arranged by the seller. they argued that payment of insurance or freight by seller for transportation of the goods to the buyer's premises would not extend the 'place of removal' to the said premises. the commissioner accepted this argument and held that actual freight and insurance charges collected by the assessee from their buyers were liable to be excluded from the assessable value. however, having found that they had collected excess amounts from their buyers towards these charges during 1996-2001, the commissioner treated these amounts as extra consideration received for manufacture of the goods and, accordingly, held these to be includible in the assessable value of the goods.2. ld. counsel for the assessee relied on the supreme court's judgement in the baroda electric meters ltd. v. cce [1997 (94) elt 13 (sc) to challenge the inclusion of the differential freight in theassessable value of the goods. ld. jdr has reiterated the findings of the commissioner.3. after considering the submissions, we find that the impugned order cannot be sustained. it was held by the apex court in the case of baroda electric meters ltd. (supra) that, where freight actually paid by seller was less than the amount collected by way of freight from buyer the differential amount was not includible in the assessable value of the goods since the duty of excise was a tax on manufacture and not on the profits made by a dealer on transportation. we find that the principle underlying the supreme court's decision is also applicable to the excess insurance charge collected by the assessee from their buyers in connection with transportation of the goods from the factory to the buyer's premises. the excess amounts collected for, or in connection with, the transportation of the goods to the buyers' premises could be treated as part of the assessee's "profits on transportation" and hence, in terms of the apex court's decision, they should be excluded from the assessable value of the goods. therefore, we set aside the demand of duty on the differential value and consequentially the penalty is also set aside. the assessee's appeal stands allowed.this appeal filed by the revenue is against the grant of the benefit of abatement of duty from the invoice price of the goods under section 4 (4)(d)(ii) of the central excise act. the only ground raised in this appeal is that the department filed a review petition in the supreme court against the court's judgement in the case of maruti udyog ltd. reported in 2002 (141) elt 3 (sc) upholding abatement of duty from sale price under section 4(4)(d)(ii) for valuation purpose. ld sdr has informed that the review petition has since been dismissed by the apex court. in the result, the ruling in the case of muruti udyog ltd (supra) continues to hold the field and, accordingly, the impugned order treating sale price as cum-duty price and allowing abatement of duty under section 4(4)(d) (ii) for arriving at the assessable value has to be sustained. the revenue's appeal is therefore rejected.

Judgment:
1. The appeal filed by M/s. Kothari Sugars & Chemicals Limited is directed against a demand of duty of Rs. l,27,534/- and a penalty of equal amount. The demand of duty is consequential to inclusion in assessable value, of excess freight and insurance charges collected by the assessee from their buyers during 1996-2001. The assessee was collecting freight and insurance charges from their buyers for making delivery of the goods at the latter's premises. The department took the view that the ownership of the goods remained with the assessee until the goods reached the buyer's premises and therefore the freight and insurance charges collected from the buyers were liable to be included in the assessable value of the goods. The assessee replied that the goods were sold to their customers directly at the factory gate (as indicated in their declaration under Rule 173C) and that the sale of the goods could not be considered to have taken place at the point of delivery by mere reason of freight and insurance having been arranged by the seller. They argued that payment of insurance or freight by seller for transportation of the goods to the buyer's premises would not extend the 'place of removal' to the said premises. The Commissioner accepted this argument and held that actual freight and insurance charges collected by the assessee from their buyers were liable to be excluded from the assessable value. However, having found that they had collected excess amounts from their buyers towards these charges during 1996-2001, the Commissioner treated these amounts as extra consideration received for manufacture of the goods and, accordingly, held these to be includible in the assessable value of the goods.

2. Ld. Counsel for the assessee relied on the Supreme Court's judgement in the Baroda Electric Meters Ltd. v. CCE [1997 (94) ELT 13 (SC) to challenge the inclusion of the differential freight in theassessable value of the goods. Ld. JDR has reiterated the findings of the Commissioner.

3. After considering the submissions, we find that the impugned order cannot be sustained. It was held by the apex Court in the case of Baroda Electric Meters Ltd. (supra) that, where freight actually paid by seller was less than the amount collected by way of freight from buyer the differential amount was not includible in the assessable value of the goods since the duty of excise was a tax on manufacture and not on the profits made by a dealer on transportation. We find that the principle underlying the Supreme Court's decision is also applicable to the excess insurance charge collected by the assessee from their buyers in connection with transportation of the goods from the factory to the buyer's premises. The excess amounts collected for, or in connection with, the transportation of the goods to the buyers' premises could be treated as part of the assessee's "profits on transportation" and hence, in terms of the apex Court's decision, they should be excluded from the assessable value of the goods. Therefore, we set aside the demand of duty on the differential value and consequentially the penalty is also set aside. The assessee's appeal stands allowed.

This appeal filed by the Revenue is against the grant of the benefit of abatement of duty from the invoice price of the goods under Section 4 (4)(d)(ii) of the Central Excise Act. The only ground raised in this appeal is that the department filed a review petition in the Supreme Court against the Court's judgement in the case of Maruti Udyog Ltd. reported in 2002 (141) ELT 3 (SC) upholding abatement of duty from sale price under Section 4(4)(d)(ii) for valuation purpose. Ld SDR has informed that the review petition has since been dismissed by the apex Court. In the result, the ruling in the case of Muruti Udyog Ltd (supra) continues to hold the field and, accordingly, the impugned order treating sale price as cum-duty price and allowing abatement of duty under Section 4(4)(d) (ii) for arriving at the assessable value has to be sustained. The Revenue's appeal is therefore rejected.